Asian stocks markets opened on a cautious note Tuesday ahead of key economic data from China and after stocks on Wall Street eked out small gains late in the session.
(Bloomberg) — Asian stocks markets opened on a cautious note Tuesday ahead of key economic data from China and after stocks on Wall Street eked out small gains late in the session.
Shares were slightly higher in Japan while benchmarks fell in South Korea and Australia. Futures for Hong Kong pointed to small declines. The possibility of further Federal Reserve policy tightening lifted Treasury yields and constrained US stocks, with the S&P 500 erasing losses in afternoon trading and the tech-heavy Nasdaq 100 underperforming major equity benchmarks.
The dollar was fractionally higher versus its major counterparts, adding to gains of the past two days. Government bond yields in Australia and New Zealand rose in the slipstream of moves Treasuries overnight.
Treasuries were little changed at the Asia open, with yield on the two-year note just below 4.2%. Richmond Fed President Thomas Barkin said he wants to see more evidence that US inflation is easing back to the central bank’s goal of 2%. New York state manufacturing activity unexpectedly expanded in April for the first time in five months as new orders and shipments snapped back.
Much of the focus in Asia will be on China and the strength of its economic recovery. Figures on Tuesday are projected to show gross domestic product expanded 4% in the first quarter from a year earlier, well below the government’s target for full-year growth of around 5%. March data may show increases in industrial output, investment and retail sales.
Meanwhile, minutes from the Reserve Bank of Australia’s policy meeting earlier this month will be parsed for signs that rates may be lifted again after a pause, while Indonesia’s central bank is expected to keep its benchmark unchanged.
A gauge of cross-asset volatility remained at 14-month low, reflecting a growing assurance that the worst of the banking turmoil and US rate hikes may be over. The VIX Index, another volatility measure, sat below 17, its lowest since the start of last year.
Still, US bank earnings on Monday didn’t entirely relieve investor nervousness that the sector can quickly bounce from turmoil that roiled several lenders earlier this year, as a so-called earnings recession in the world’s biggest economy looms.
Charles Schwab Corp. rose as executives said the firm can weather the turmoil roiling US banks, while pausing stock buybacks in response to the industry’s worst crisis since 2008. State Street Corp. fell as it reported clients retreated from its investment products.
With the earning season starting, “we’ve had estimates be revised lower for this quarter, they’re down around 7%, which is a pretty low bar to step over and I think you’re starting to see companies do that,” Walter Todd, chief investment officer at Greenwood Capital, said on Bloomberg Radio. “The risk lies in the second half of the year, perhaps in the earnings that need to be revised down in that period.”
“The risk-reward for equities does not look attractive into the second half in light of risk-free hurdle rate at 5%,” a team of strategists at JPMorgan Chase & Co., including Marko Kolanovic, wrote in a note. “The main disconnect revolves around the hopes of a soft landing with inflation coming down quickly.”
Elsewhere, oil was steady after West Texas Intermediate posted its biggest loss in a month on Monday. Gold was little changed.
Key events this week:
- China GDP, retail sales, industrial production, Tuesday
- US housing starts, Tuesday
- Goldman Sachs and Bank of America release first-quarter earnings, Tuesday
- Fed’s Michelle Bowman discusses digital currency, Tuesday
- Eurozone CPI, Wednesday
- Fed releases Beige Book, Wednesday
- Fed’s John Williams gives a speech, Wednesday
- Fed’s Austan Goolsbee is interviewed on NPR, Wednesday
- China loan prime rates, Thursday
- Eurozone consumer confidence, Thursday
- US initial jobless claims, existing home sales, index of leading economic indicators, Thursday
- ECB issues report on March policy meeting, Thursday
- Fed’s Christopher Waller speaks at cryptocurrency-focused event, Thursday
- Fed’s Patrick Harker speaks on “monetary policy and housing”, Thursday
- Fed’s Loretta Mester discusses the economic and policy outlook, Thursday
- Fed’s Raphael Bostic discusses regional and national economic conditions, Thursday
- Fed’s Michelle Bowman and Lorie Logan speak at event, Thursday
- PMIs for Eurozone, Friday
- Japan CPI, Friday
- Fed’s Lisa Cook discusses economic research at an event, Friday
Some of the main moves in the market:
Stocks
- S&P 500 futures were little changed as of 9:06 a.m. Tokyo time. The S&P 500 rose 0.3%
- Nasdaq 100 futures were little changed. The Nasdaq 100 was little changed
- Japan’s Topix index rose 0.2%
- Australia’s S&P/ASX 200 Index fell 0.2%
- Hong Kong’s Hang Seng futures fell 0.5%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0925
- The Japanese yen was little changed at 134.36 per dollar
- The offshore yuan was little changed at 6.8796 per dollar
- The Australian dollar was little changed at $0.6700
Cryptocurrencies
- Bitcoin was little changed at $29,454.85
- Ether was little changed at $2,075.27
Bonds
- The yield on 10-year Treasuries was little changed at 3.59%
- Australia’s 10-year yield advanced eight basis points to 3.45%
Commodities
- West Texas Intermediate crude was little changed
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Sujata Rao and Abigail Doolittle.
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